Investment Insights

Daily Insights

Focus of the Day

  • Anticipation of the Fed’s rate cuts led global investment-grade bond yields to a two-year low

Other Commentaries

  • US August PPI inflation further declined; ECB cut rates as expected; Commerce Minister Wang will visit Europe to resolve trade dispute over electric vehicles; Mainland insurance sector's ten guidelines promote quality development

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • Market participants are focused on the potential impact of upcoming presidential debates on election outcomes, which may influence short-term performance of US equities. Additionally, the Fed's mid-September interest rate decision will be pivotal for market direction 
  • European stocks have pulled back from near-historic highs. Nonetheless, the Eurozone economy has not shown significant slowdown. Persistently declining inflation supports expectations of further rate cuts by the ECB this year, which could lead to a rerating of euro-denominated assets 
  • Chip-related stocks were under pressure, negatively impacting markets in Taiwan and South Korea, as Asian equities consolidated at elevated levels. Despite a softer US dollar and improving political outlook, capital has been increasingly flowing into ASEAN markets, such as Thailand 
  • The declining  US dollar has contributed to a modest rebound in emerging Latin American currencies. However, recent subdued performance in commodity prices may continue to weigh on the performance of related emerging Latin American equities 
  • Global tech stocks have shown volatility, compounded by earnings warnings from some local property firms, impacting Hong Kong's market. Nevertheless, leading Chinese e-commerce firms have completed regulation-compliant overhaul and opened payment systems, stabilizing the tech index in recent month
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Bond Markets View

  • The US job market continues to cool, contributing to a downward trend in Treasury yields. Sovereign debt indices have recently stabilized 
  • New issuance in the US investment-grade bond market has increased. The ongoing decline in Treasury yields has driven demand for investment-grade bonds, resulting in 45 consecutive weeks of net inflows into this segment 
  • Inflation across Asia remains generally controlled, with easing inflation supporting central banks in loosening monetary policy. This environment is expected to improve issuer credit quality, bolstering overall Asian debt performance 
  • The US high-yield bond market benefits from ongoing capital inflows, sustaining recent positive performance. Anticipated interest rate cuts by the Fed are expected to create a more favorable financing environment for corporations, helping to keep credit spreads low 
  • The market is closely monitoring sales performance of Chinese property developers during the traditional peak season whilst Asian high-yield bonds consolidate. Meanwhile, major Macau gaming operators have reported positive cash flows in recent quarters, which may enhance their debt profiles 
  • A weaker US dollar is advantageous for emerging market debt, but fluctuations in oil and commodity prices warrant caution due to their potential impact on the fiscal health of commodity-dependent countries 
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Market Drivers and Near-term Risk Sentiment

Asset Allocation Focus

  • Bonds – Recent US employment data fell short of expectations, reinforcing market speculation around potential rate cuts by the Fed. Consequently, US Treasury yields have continued to decline, benefiting mid- to long-dated high-rated dollar bonds that are sensitive to interest rates 

  • Equities – Concerns regarding US economic downturn risks, coupled with the US Department of Justice's antitrust investigations into a leading chipmaker, may adversely affect tech stock performance. Investment strategies should balance equities and fixed income, with a focus on defensive high-dividend sectors 

  • US hiring fell short of market expectations in August, although the unemployment rate slightly improved. This indicates a labor market that, while moderating, is in an orderly fashion, lessening the likelihood of a more than 25 basis point rate cut by the Fed in September. Consequently, downward pressure on the US dollar appears temporarily alleviated, suggesting a period of consolidation 
  • August’s non-farm payrolls in the US added only 142,000 jobs, along with downward revisions for July and June, highlighting a clear downward trend in both the labor market and the economy. As the rate cut cycle approaches, US Treasury yields continue to decline, with short-dated yields falling more than long-dated yields, resulting in an end to the yield curve inversion. The market is awaiting the August CPI inflation data to gauge the potential magnitude of future rate cuts 
  • August's core inflation in mainland China fell to 0.3%, its lowest in over three years. Early September reports indicate potential two-phased reductions in existing mortgage rates to ease homeowners' interest burdens. Additionally, the People's Bank of China has indicated that there is still room for further reserve requirement ratio cuts, leading to expectations of a more accommodative monetary policy aimed at stimulating inflation recovery and revitalizing the domestic property market 

Provided by Hang Seng Investment Services Limited

Investment Commentaries

第三季增持債券 審慎部署股市

Hong Kong Stock Market Express (Chinese Only)

US Tech enters correction phase (Chinese only)

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